Yellow Media Inc., publisher of the well-known Yellow Pages directories, says its transformation to a digital company is on course and that it’s looking for growth in the coming quarters now that the economy has improved.
More than 25% of Yellow Media’s revenues are now coming from the digital side of its business, chief executive Marc Tellier said Thursday, after the company posted a first-quarter loss that included a major writedown.
“Given this year’s improved economy and the investments made in our business over the last few years, we are well positioned to reacquire growth in the next coming quarters,” Tellier told analysts on a conference call.
Tellier said later that he doesn’t have a specific timeline for the company’s digital transformation to be complete.
“My sense is we appease a lot of those skeptics once we’ve reached roughly half and half online and print (revenues),” Tellier said in an interview.
Growth should come from efforts of the company’s sales team with a new multimedia offering called Yellow Pages 360 Solution, which offers tailored online, mobile, print and search engine solutions to small- and medium-sized businesses, Tellier said.
“If the early momentum continues, that should start fuelling growth again.”
Yellow Media reported it lost $34.6 million in the first quarter as it booked a $112-million writedown related to the pending sale of Trader Corp., home of AutoTrader magazine.
Yellow Media recently announced the sale of Trader Corp. for $745 million to help reduce debt, after paying $1.2 billion for the division about five years ago.
Tellier said about half a billion dollars will be used from the proceeds of the sale to buy back or pay down debt, adding some smaller assets may be sold to further reduce debt.
“Never say never, so we will continue to evaluate our options. There’s isn’t anything of the size and the impact of Trader to divest but we are looking at some smaller alternatives.”
Yellow Media also announced a share buy-back program of about 50 million shares.
The quarter’s loss compared with a profit of $127.1 million a year earlier.
Yellow Media said quarterly earnings from continuing operations were $70.5 million, down from $120.4 million for the same quarter of 2010. Earnings per share from continuing operations were 13 cents, compared to 23 cents for the same period of 2010.
Revenue grew slightly to $349.4 million from $339.7 million a year prior.
RBC Capital Markets analyst Drew McReynolds said revenues were in line with his estimate of $349 million, but slightly below the consensus estimate of $351 million.
“We expect the company to provide revised 2011 and 2012 guidance with (its) second-quarter results following recent acquisitions and divestitures,” McReynolds wrote in a research note.
“Management continues to maintain a cautious outlook with respect to the strength and sustainability of an economic recovery,” he added.
McReynolds noted that during the last 12 months Yellow Media maintained its advertiser renewal rate at 88% and acquired 28,000 new advertisers. He also said online revenues were $83 million, representing 25% of revenues and 65% advertiser penetration.
